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I happen to like stochastic as my momentum indicator. The key is to know how
stochastic works. momentum indicators are usually based upon the closing prices of
the bars. There are many other momentum indicators, find one that you are comfortable
with and then find out what the developer used the indicator to determine. Then try to
understand what the picture is telling you, don't depend on cross overs, over bought
or other terms to influence your trading. the picture should tell you what to do. In
testing the majority of systems, I found that cross over systems and over
bought/oversold systems brought less then 38% accuracy. That is better then most
break out systems. In many systems you can use the highs, lows or an average of the
bar to figure the momentum. In trading I use three time frames. I use the longer one
for direction, the intermediate for target location and the short one for entry. If
the momentum on the directional time frame turns down, I exit the trade and look to
reenter the next leg, whether up or down. Ira
Randall Kurzon wrote:
> And how do you define and/or plot momentum? I have seen several methods
> used and would be interested to hear more from someone who uses momentum
> to help establish an exit point.
>
> Thanks, Randall
>
> Ira wrote:
> >
> > One should not use price alone as an exit criteria. there are always 3
> > factors. Price, time, and momentum. One will give you the information necessary
> > to exit the trade profitably. Have a good day, Ira
> >
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